The impact of managerial discretion on fair value information in the Australian agricultural sector

Liyu He, Sue Wright, Elaine Evans

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This study examines the application of fair value measurement for biological assets and how managers exercise their discretion over fair value measurement to achieve desired earnings outcomes. Using Australian data, we find that managers report larger agricultural gains when the earnings target is not met. This phenomenon is more prominent when managers are provided with higher levels of discretion. Boards of directors appear to understand this strategy and distinguish unrealised agricultural earnings from other earnings when compensating managers. However, boards do not appear to intervene in managers’ choices of fair value estimates.
Original languageEnglish
Pages (from-to)1897-1930
Number of pages34
JournalAccounting & Finance
Volume61
Issue numberS1
Early online date21 May 2020
DOIs
Publication statusPublished - Apr 2021

Keywords

  • Biological assets
  • Board monitoring
  • Compensation
  • Fair value measurement
  • Managerial discretion

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